Kalshi Faces CFTC Probe as Sports Mention Markets Suspended

Kalshi is in advanced discussions with Sequoia Capital and Wellington Management for a new $750 million funding round at a $40 billion valuation, according to The Information. The Silicon Valley-based Sequoia, which has $56 billion in assets under management, is already an existing investor with an executive on Kalshi's board of directors. For Wellington, a Boston-based financial giant with $1.3 trillion in client assets under management, this funding round would mark its first investment in Kalshi. The funding amount could exceed $750 million, with Kalshi considering an IPO in 2027 as reported by CEO Tarek Mansour in June.

The U.S. Commodity Futures Trading Commission has used its emergency powers to protect KalshiEX operations as the company faces a legal battle with New York over prediction markets and gambling laws. According to recent reports, Kalshi subsequently removed the lawsuit to the U.S. District Court for the Southern District of New York, where federal courts issued conflicting rulings. While a Minnesota federal judge blocked enforcement of a ban on prediction markets by that state, in July, a New York federal judge denied a request for Kalshi's sports contracts to be enjoined. The CFTC has named Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin as defendants, asserting exclusive federal jurisdiction over derivatives traded on designated contract markets. In July, the CFTC asserted emergency authority after a Michigan state court decision affected trades for Kalshi, with the order requiring Kalshi to continue operating under federal regulations for exchanges.

The latest CFTC review follows a significant case involving Gabriel Perez, Trump's longtime teleprompter operator, who allegedly had advance access to prepared remarks for more than a dozen presidential appearances. As reported by Reuters, Kalshi identified suspicious trades tied to words in presidential appearances and referred the activity to the CFTC, with more than $90,000 in potential profits frozen before they could be withdrawn. The White House later removed Perez from his role. This case demonstrates the insider trading risks that can arise in mention markets, where one individual may effectively determine settlement simply by saying a particular word. The CFTC has also warned against broad template self-certifications, telling exchanges that each product needs enough detail for regulators to assess settlement methods, data sources and compliance controls.

Kalshi's annualized revenue increased to $4 billion in July, bolstered mostly by 2026 World Cup betting, according to The Information. The company now generates about $4 billion in annualized revenue—driven largely by sports contracts—and claims 95 percent of the U.S. prediction market by revenue. Most of Kalshi's revenue comes from sports contracts, which contribute to over 80% of its volume. The company raised $1 billion at a $22 billion valuation in May and is now the number one prediction market platform by revenue, followed by Polymarket, which was last reported to be seeking funding at $20 billion following a $600 million investment from the Intercontinental Exchange at a $15 billion valuation in August. Sequoia Capital recently stated that Kalshi 'now claims 95% U.S. market share in prediction markets.'

Kalshi announced Wednesday that Jeff Bandman, the lawyer who helped Kalshi secure a license to be a CFTC-regulated exchange in 2020, is returning to Kalshi as CEO of Kalshi Prime, which serves customers of Kalshi's margin perpetual futures business. The company has also appointed Ryan Singer as Chief Technology Officer, bringing over 20 years of experience in building high-performance trading systems. These leadership changes come as Kalshi continues to navigate regulatory challenges while expanding its market presence. The CFTC has issued new guidance warning prediction markets platforms against using American odds formats similar to those used by sports betting companies, with the agency advocating the use of notional values or percentages in event contracts instead.

North Carolina recently enacted legislation imposing a 6% tax on the net trading fee revenue earned by prediction-market operators attributable to the state, marking a significant development in the taxation of these markets. The same legislation also increased the state's sports wagering tax, but notably North Carolina chose to recognize federally regulated prediction-market platforms separately from traditional sports wagering. For individual investors, this law does not create a new state tax on their trading activity, but it signals that lawmakers are beginning to build tax systems around prediction markets as their own asset class. The federal government is also playing an increasingly important role, with the CFTC consistently maintaining that federally regulated event-contract markets fall within its jurisdiction rather than under state gambling laws. The agency has recently defended this position in litigation involving state attempts to regulate prediction-market activity, demonstrating that these markets are becoming an established part of the U.S. financial system.